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Businesses Back Off RFID

Consumer Backlash Discourages Spy Chip Promoters

By Martin H. Bosworth
ConsumerAffairs.com

March 27, 2007

• TSA Site Left Passenger Data Exposed To ID Theft • Connecticut Governor Wants 'Opt Out' For Online Directories • Verizon Gave Customer Data To Government Without Court Orders • House Democrats Probe Warrantless Surveillance • Many Facebook Users Compromise Own Identities • Spy Court Tells White House To Fess Up • FBI Uses Data Brokers, "Risk Scores" To Hunt Terrorists • GAO: "Critical" Weaknesses In FBI Security Network • How Safe Is That Free Wi-Fi Connection? • Businesses Back Off Spy Chips • Insurer Unlawfully Poached Consumers' Credit Reports • GAO Cites Medical Privacy Issues • Google Anti-Phishing Feature Accidentally Reveals Too Much • Bush Spy Program Placed Under Court Review • "National Security Letters" Used To Examine Americans' Financial Records • Bush Gives Himself Authority to Search the Mail • Court Shuts Down "Media Motor" Spyware Operation • Consumerists Want FTC Probe of Online Advertising • Firefox/Google Team Up To Fight Phishing • Schwarzenegger Terminates Spychip Bill • For Sale: Your Health Care Records • Xanga.com Fined for Children's Privacy Violations • Facebook Does an About Face • Chase Trashes Tapes Containing Circuit City Customers' Data --- • More Privacy News ...

To hear retailers and suppliers tell it, radio frequency identifier ("RFID") tags -- also known as "spy chips" -- are the way of the future, a means to effectively control inventory and track merchandise from end-to-end.

Despite criticism about the lack of privacy protection and potential for misuse in the technology, many retail chains and finance giants are going full-bore with plans to implement RFID technology in all manner of products.

However, some businesses such as Wal-Mart, DHL, and American Express have recently announced plans to move more slowly, leaving the impression that wide-scale adoption of RFID may not be as imminent as originally thought. In the case of American Express, the plans were apparently changed because of the potentially harmful side effects to consumers' privacy.

Representatives of Wal-Mart recently commented in an InformationWeek article that the Bentonville, Arkansas-based retail giant was focusing more of its RFID efforts on "in-store application," such as tagging items, rather than supply-chain efforts. The difficulties centered around supply partners' slowness to adopt the technology and the time taken to catalog products marked with both RFID chips and traditional bar codes.

The next day, DHL announced that it too was rethinking its initial plans to tag "every product it ships" with RFID by 2015. Bob Berg, DHL's senior program manager for RFID, said that the plan would cost over $1 billion and could not "be done on a lark." The company still plans to focus on implementing RFID technology in specific areas, such as transporting high-security or high-value items.

American Express, for its part, announced plans to revamp its "consumer tracker" plan, wherein RFID tags in items like its AMEX Blue card would be used for tracking consumers as they moved about in a store, monitored by RFID readers in the shelves.

The card issuer's plan had been exposed by members of the CASPIAN (Consumers Against Supermarket Privacy Invasion And Numbering) organization, led by anti-spychip advocates Dr. Katherine Albrecht and Liz McIntyre.

CASPIAN obtained a copy of a patent filed by American Express for a "Method and System for Facilitating a Shopping Experience," wherein the readers would not only track consumer behavior and purchases in a store, but would transmit targeted advertisements based on their choices. CASPIAN compared the patent plan to technology demonstrated in the sci-fi thriller "Minority Report," in which Tom Cruise is zapped with individual holographic advertisements as he runs by store windows.

After meeting with CASPIAN, American Express agreed to review its entire patent portfolio, to ensure that any chipped technology was used only with consumer consent, and to offer "chipless" versions of its cards for consumers who want them.

McIntyre sees the moves by Wal-Mart and DHL as reactions to what she calls the "consumer backlash" against RFID tracking and chipping.

"Wal-Mart in particular, the driving force behind commercial RFID adoption, can ill afford to alienate its customer base and further erode its bottom line," McIntyre said to ConsumerAffairs.com. "Its suppliers aren't excited about angering consumers either, and have been quite upset about Wal-Mart's costly RFID directives."

Even one of the most ardent boosters of RFID technology may be changing his tune.

Tommy Thompson, former secretary of Health and Human Services and now a board member of RFID manufacturer VeriChip, quietly announced his resignation from the board on March 8th. VeriChip's disclosure claimed Thompson wanted to devote all of his attention to his recently-announced -- though little noticed -- candidacy for President.

Thompson had been an advocate of implanting RFID chips into all military personnel in order to better access their medical histories, and had repeatedly promised to get a chip for himself, but was not known to have done so before he stepped down from the VeriChip board.

Ironically, although the U.S. military and the Department of Homeland Security have expressed interest in RFID as well, sales have not been brisk. A report by RFID label supplier IDTechEx found that a "severely uneconomic price" hindered sales of RFID chips, readers, and tags to "retail and military mandates."

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